Buying a franchise: The cost

The startup money required from a franchisee can be prohibitive for the small businessperson. Typical opening costs for a franchised small business range from $25,000 to $150,000, according to the Small Business Administration. On top of that, franchisees pay from 4 percent to 6 percent of their sales in annual royalties.

Some franchise systems, like McDonald's, will not assist with any financing, but a recent survey by Francorp/DePaul University says that 40 percent of franchisers will. However, an established franchise name can get an entrepreneur some cash. Generally, banks have had better luck collecting on loans they have made to franchisees than on loans they made to non-franchisees in similar lines of business, according to Lyle Fredrickson, senior vice president of First Capital Bank in Phoenix.

"Most lenders will (lend to franchisees) if they know the franchisor with a good name like McDonald's or Burger King," explains Fredrickson. "The advertising and name are worth a lot of business."